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The influence of direct cross-straits shipping on the smooth transition dynamics of stock volatilities of shipping companies

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  • Hsiang-Hsi Liu
  • Chun-Chou Wu
  • Yi Kai Su

Abstract

This article use the smooth transition Generalized Autoregressive Conditional Heteroscedastic (GARCH) model to examine the impacts of direct cross-strait shipping on the dynamic structure of the stocks of shipping companies in Taiwan. We inferred the fact that the structural changes affect the volatility process for all stocks of shipping companies. In addition, we obtain the transition function for all related stock volatilities of shipping companies and find that their structural adjustment processes launch prior to the introduction of direct cross-strait shipping. Meanwhile, the estimated transition functions show that the stock return volatilities of shipping companies have U-shaped patterns of structural changes. This article also caught the corresponding calendar dates of structural change about volatility pattern.

Suggested Citation

  • Hsiang-Hsi Liu & Chun-Chou Wu & Yi Kai Su, 2012. "The influence of direct cross-straits shipping on the smooth transition dynamics of stock volatilities of shipping companies," Applied Financial Economics, Taylor & Francis Journals, vol. 22(16), pages 1331-1342, August.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:16:p:1331-1342
    DOI: 10.1080/09603107.2012.659343
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